CACEIS has recently published a new report on the Democratisation of Semi-Liquid Funds, carried out with Private Equity Wire. The report surveys leading semi-liquid fund managers on the convergence between public and private markets, covering demand drivers, portfolio construction, liquidity, operational models and innovation.
Among the key findings, 41% identify end-investor liquidity needs as the primary growth driver, while 47% believe greater investor education and awareness is the best way to address redemption challenges on this type of products.
Mounir Aboufaras
Group Head of PERES Client Design
and Strategic Integration
Beyond these findings, the development of semi-liquid or ‘hybrid’ funds represents a broader evolution of the alternative investment fund model. Historically, private market funds predominantly operated through private placement, closed-ended structures, with commitments & capital calls, investments, and distributions. Today, open-ended semi-liquid structures increasingly combine private and illiquid assets with more liquid instruments while offering periodic subscription and redemption opportunities.
For asset servicers, this brings together the characteristics of traditional open-ended and private market funds within a single structure – creating new operational challenges.
Five characteristics shaping the hybrid fund landscape
1. Liquidity management
Semi-liquid structures create a natural tension between investors’ expectations for periodic liquidity and the inherently illiquid nature of part of the portfolio. The objective is not to provide unlimited liquidity, but to align the liquidity offered to investors with that of the underlying assets. Redemption windows, gates, notice periods, cash buffers, liquid asset sleeves and credit facilities can all contribute to achieving this balance.
2. Valuation and NAV
Different assets operate on different valuation cycles. Listed securities may be priced daily, while private equity, real estate or infrastructure assets may be valued monthly or quarterly. As subscription and redemption opportunities increase, robust valuation governance and timely NAV production become critical to ensure fair treatment of incoming, existing and redeeming investors.
3. Data management
Hybrid funds need to bring together data from administrators, depositaries, investment managers, portfolio companies, banks and valuation agents, often across several jurisdictions. The challenge is increasingly to collect, reconcile and normalise this information into one consistent version of the truth, while providing clients with a consolidated view across their investments.
4. Customisation versus scalability
Clients increasingly expect asset servicers to take on activities they previously managed internally, from sophisticated reporting to additional operational services. The challenge is to industrialise customisation by providing flexible, value-added solutions while maintaining automation, strong controls and operational efficiency.
5. Making complexity invisible to the client
Hybrid funds will remain operationally complex. Technology will not eliminate this complexity, but it can prevent clients from having to manage it themselves. The direction is towards one integrated digital environment, giving clients easier access to their data, activities and interactions with their asset servicer.
The deeper operational challenge: servicing different rhythms
The real servicing complexity lies in synchronising different operating cycles within the same fund. Liquid assets can be priced daily and settled in a few days, while private assets rely on less frequent investments. At the same time, investors may expect monthly or quarterly subscription and redemption opportunities. NAV production, valuation governance, cash forecasting, liquidity monitoring, investor dealing, reconciliations and reporting therefore need to operate as one interconnected framework.
The role of the asset servicer is consequently evolving from simply processing transactions towards orchestrating the fund lifecycle.
Data as a service
Data is also becoming a service in itself. Clients increasingly expect consolidated portfolio information, greater look-through, liquidity information, investor activity and operational KPIs across funds, structures, and jurisdictions. The ability to collect, reconcile, normalise and deliver this information consistently is becoming a core component of the servicing model and an important enabler of informed decision-making.
The digital client journey
The next step is to bring these capabilities together within an integrated digital client environment. This is already an area of significant investment and active development across the industry. The objective is to bring together data and interactions that historically sat across multiple systems and processes, providing clients with greater transparency, easier access to information and fewer operational touchpoints.
For hybrid funds, this is particularly important: as servicing becomes more complex behind the scenes, the client experience should become simpler. Ultimately, the evolution of hybrid funds is driving a broader shift in alternative asset servicing. Differentiation will increasingly come from the ability to combine alternative-fund expertise, operational orchestration, data and technology with a simple and integrated client experience.
“The challenge is not to make illiquid assets liquid. It is to build the right liquidity and servicing framework around them – connecting valuation, cash, data and investor activity without passing that complexity on to the client.” Mounir Aboufaras Group Head of PERES Client Design & Strategic Integration at CACEIS.
To view the CACEIS / Private Equity Wire report, click here or paste this link into your browser Private Equity Wire® Semi-Liquid Funds by Global Fund Media - Issuu
